Given other factors, the price of Wal-Mart stock will increase
a. if nominal interest rates fall
b. if the corporate income tax rate is reduced
c. if real interest rates fall
d. in all of the above cases
Answer:
The viewpoint that the Great Depression was linked to aggregate demand shocks is
supported by
a. the inflation that occurred in the 1930s
b. the sharp increase in input prices, especially wages
c. the startling rise in velocity of money
d. the wealth effects of the stock market crash
Answer:
The Taylor rule can best be categorized as
a. discretionary monetary policy
b. a passive monetary rule
c. an active monetary rule
d. none of the above
Answer:
The greatest economic potential of electronic money lies in the fact that:
a. inflation would tend to diminish because fewer checks would be written
b. use of credit cards would be encouraged over checks
c. bank profits would rise
d. use of socially-costly checks and credit cards would decline
Answer:
When equilibrium output is less than full-employment output,
a. contractionary monetary policy actions are called for
b. a recessionary gap exists
c. an inflationary gap exists
d. unemployment will be below its natural rate
Answer:
The depository institution with the smallest average size is the:
a. credit union
b. mutual savings bank
c. savings and loan association
d. commercial bank
Answer:
Under the European Monetary System (EMS)
a. member nations gave up their individual currencies to adopt a single currency
b. exchange rates were fixed between member countries
c. the majority of European countries moved toward floating exchange rates
d. none of the above
Answer:
If the yield curve were currently flat, an announcement which caused the public to
expect interest rates to rise would:
a. cause borrowers to borrow short-term now
b. cause the yield curve to become inverted
c. cause investors to buy long-term now
d. do none of the above
Answer:
Alan Greenspan’s famous discussion of “irrational exuberance” in 1996:
a. led to aggressive movements by the Fed to “pop” a perceived “bubble” in the U.S.
stock market
b. referred to the Fed’s persistent and possibly irrational optimism about future stock
prices
c. referred to a situation in which U.S. stock prices were above those warranted by
economic conditions
d. was overly pessimistic, since the stock market in 2004 remained at even higher levels
than 1996
Answer:
According to the assumptions of the segmented markets theory, the normal shape of the
yield curve should be:
a. flat
b. ascending
c. descending
d. none of the above–that is, the theory cannot predict a “normal” shape
Answer:
The text indicates that, over the 1950-2003 period, the yield curve was upward sloping
approximately what percentage of the time?
a. 25 percent
b. 64 percent
c. 88 percent
d. 98 percent
Answer:
When inflation expectations increase:
a. the demand for loanable funds decreases and interest rates fall
b. the supply of loanable funds increases and interest rates rise
c. the demand for loanable funds increases and interest rates rise
d. both a and c occur
Answer:
Which of the following was not a part of the Reagan economic program in the 1980s?
a. a personal income tax cut
b. wage and price controls
c. an investment tax credit
d. tax incentives to increase savings
Answer:
The money supply multiplier is ____ the naive deposit multiplier.
a. the same size as
b. bigger than
c. smaller than
d. we can reach no conclusion–sometimes it is bigger, sometimes it is smaller
Answer:
Inflation targeting regimes have been implemented
a. in all European nations
b. in both developed and developing nations
c. only in New Zealand
d. in all nations that belong to the IMF
Answer:
Which of the following characterizes U.S. Treasury bills?
a. They are sold at a discount from face value by dealers and appreciate in price as the
maturity date approaches.
b. They are sold at a discount from face value by brokers and are nonmarketable until
maturity.
c. They are sold at face value by dealers, and their price remains constant unless interest
rates fluctuate.
d. None of the above is true.
Answer:
Most of the time when short-term yields are rising:
a. long-term yields are falling
b. long-term yields remain constant
c. long-term yields are also rising
d. there can be no generalization, on average
Answer:
Variables which are most closely linked to the ultimate goals of policy and which are
targeted in order to achieve those goals of policy are termed
a. final goals
b. intermediate targets
c. operating targets
d. tools or instruments
Answer:
An improvement in technology will cause a nation’s
a. aggregate supply to increase
b. aggregate supply to decrease
c. aggregate demand to increase
d. aggregate demand to decrease
Answer:
In the long run,
a. the unemployment rate can be above the natural rate of unemployment
b. the unemployment rate can be below the natural rate of unemployment
c. the unemployment rate must be equal to the natural rate of unemployment
d. all of the above are possible
Answer:
Benefits to surplus units in society (savers) resulting from the existence of financial
intermediaries include:
a. gaining access to greater financial expertise
b. overcoming regressive transactions costs
c. achieving greater diversification
d. all of the above
Answer:
In the bank liquidity trap,
a. monetary policy is ineffective at stimulating economic activity
b. increases in the base cause equal and opposite relative decreases in the money supply
multiplier
c. banks stockpile reserves, but don’t use them to buy securities or make loans
d. all of the above occur
Answer:
Which of the variables underlying the money supply multiplier are bankers most
capable of influencing?
a. rr
b. re
c. k
d. bankers have no influence over any of the above
Answer:
An advantage of the open market operations tool over the other tools of Fed policy is
a. its precision
b. its flexibility
c. both of the above
d. neither of the above
Answer:
“Cash items in the process of collection”
a. is a liability to the Fed but corresponds to an asset of a member bank
b. refers to loans to member banks which will come due within one week
c. is a result of the check-clearing process
d. none of the above is true
Answer:
Suppose that Bob Smith withdraws $400 cash from his checking account. The net
impact of this transaction is to
a. leave the base unchanged
b. increase the base by $400
c. increase reserves by $400
d. decrease the base by $400
Answer:
A strong depreciation of the U.S. dollar, such as occurred in the late 1970s, has the
following consequences:
a. it tends to boost inflation in the U.S.
b. it tends to reduce the U.S. trade deficit
c. it tends to reduce unemployment in U.S. export industries
d. all of the above
Answer:
In which period was the ex post real Treasury bill the lowest?
a. 1961-1970
b. 1971-1980
c. 1991-2000
d. 2000-2003
Answer:
FDICIA included provisions affecting all of the below except
a. the “too big to fail” policy
b. recapitalization of the FDIC
c. creation of the Savings Association Insurance Fund
d. the frequency of bank examinations
Answer:
Over the past 50 years, the ratio of
a. G/B has declined
b. P/B has declined
c. TCu/B has risen
d. all of the above have occurred
Answer:
Friedman believes that the long-term (100-year) trend of velocity of money is best
explained by the trend of
a. financial technology
b. income
c. interest rates
d. institutional factors
Answer:
For commercial banks, which of the following is correct?
a. reserves = excess reserves + required reserves
b. required reserves = reserves + excess reserves
c. excess reserves = required reserves + reserves
d. none of the above is correct
Answer:
When the U.S. dollar depreciates on foreign exchange markets, which of the following
tends to occur?
a. Prices in the U.S. tend to decline.
b. U.S. products become more expensive abroad.
c. The U.S. price level increases.
d. None of the above occurs.
Answer:
Arguments against central bank intervention when stock market bubbles are suspected
to exist include
a. bubbles are hard to detect
b. the ideal policy response is not certain
c. monetary policy is too blunt a tool for letting the air out of bubbles
d. all of the above
Answer:
Which of the following statements is true?
a. When the Fed increases its portfolio of securities, bank reserves tend to increase.
b. When the Fed increases its portfolio of securities, bank lending tends to increase.
c. When the Fed increases its portfolio of securities, investment spending tends to
increase.
d. All of the above are true.
Answer: